South Korean shipbuilders are facing pricing challenges in the LNG carrier market. While charter rates for these carriers have sharply decreased and new order prices are trending downward, some experts believe that the boom period for this market is not over yet.
Declining Charter Rates and Orders
According to provided data, from January to October of this year, 76 LNG carriers of 174,000 cubic meters or larger have been ordered. Among these, South Korea accounted for 44 ships (57.9 percent) and China for 32 ships (42.1 percent). Although LNG carrier orders have nearly doubled compared to last year, signs of declining demand have been observed in the second half of the year. In the first half of the year, orders reached 59 ships, but this number dropped to 17 ships in the second half.
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Demand Forecast and New Projects
South Korean shipbuilders are closely watching orders from LNG liquefaction projects in North America. These orders are expected to commence soon in the United States and Canada. According to recent reports, global LNG liquefaction projects that have reached Final Investment Decision (FID) from last year to the third quarter of this year have a total capacity of 135 million tons per year (MTPA). While most LNG carriers needed for these projects have not yet been ordered, it is estimated that around 200 LNG carriers will be required.
Meanwhile, the French company GTT, which owns the key technology for LNG tanks, has stated that there are no signs of declining demand in the LNG carrier market. In the third quarter of this year, the company received 80 orders, nearly three times the 27 orders in the same period last year.
The pricing trend is also changing. The new construction price for a 174,000 cubic meter carrier has decreased from $248 million in January to $245 million in October. This price drop is influenced by intense competition with China. Additionally, Samsung Heavy Industries, which has the highest number of LNG carrier orders among South Korean shipbuilders, has recently announced that the prices of new contracts for these carriers have decreased.
In fact, the prices of new LNG carrier contracts at Samsung Heavy Industries have decreased since late last year and early this year, with the latest order for two ships last month recorded at 672.2 billion won (equivalent to $247.20 million per ship).
Despite the existing challenges, some analysts believe that demand for LNG carriers will be strong next year due to capacity developments in LNG liquefaction projects in the United States.
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